City Government

Rent Regulation and The Division Of Housing and Community Renewal

For many New Yorkers, the words “rent regulation" immediately conjure up the boisterous annual deliberations of the Rent Guidelines Board. The board's deliberations this year, now ongoing, promise to be more boisterous than last year, when political pressure from the mayor's office kept the board from giving landlords a huge spike in rents on the almost one million rent-stabilized apartments in the city.

The board's June 19 hearing, which will take place for the first time in the Bronx, could be the most intense yet. Tenant organizers are working to bring out as many tenants as possible in the borough that has the highest number of tenants hauled to court for non-payment of rent.

The rent spike this year could set a record. Its public members, appointed by the mayor, largely determine the final outcome of the board's deliberations. It does not bode well for tenants that last month the mayor dumped the one public member, Martin Zelnick, an architect, who showed the greatest concern for tenants in recent years.

The board's annual deliberations, however, are just one piece of the rent regulation system, albeit the piece that generally gets the most attention. Of equal or greater significance is the work of the state's Division of Housing and Community Renewal (DHCR), the agency charged with enforcing the laws that apply to rent-regulated apartments.

Some tenant advocates are hopeful that with the election of a new governor next year, the state agency would do a better job of protecting tenant rights. Critics charge that the agency has gotten so bad under Governor George Pataki that the Emergency Tenant Protection Act, which the agency enforces, should be renamed the Emergency Landlord Protection Act.

The Division of Housing and Community Renewal is also the state's main housing development agency and its efforts on that front, too, have drawn complaints from housing advocates.

The agency is adamant in its own defense, releasing a statement that said in part: "This agency has a very strong and distinguished record supporting affordable housing and tenants' rights across this state, and we take that role very seriously."

Pro-Landlord Or Pro-Common Sense?

State Senator Liz Krueger is one of those who is disappointed in the agency’s performance. "It's not a surprise that people have a high frustration level" with the state's housing agency, Krueger said. "Dramatic problems have been growing in DHCR over the years. Some of their interpretations [of housing laws] raise red flags."

Tenant advocates charge that on virtually every type of complaint tenants can file and every type of request to increase rents landlords can file, the agency comes out on the side of landlords.

Take the case of "preferential rents." Wherever landlords have trouble renting apartments or where they have sought to keep a tenant, landlords have offered to rent apartments for less than the rent registered with the agency. For years, the agency considered preferential rents the base rent for that tenant. But following a change in the law in 2003, when a lease renews on a rent stabilized apartment, the landlord can now charge an increase based on the (higher) legal registered rent. The agency's interpretation of this change show its favoritism,say some critics.

"Even when the lease says the preferential rent will last the length of the tenancy, (DHCR) is ignoring it and allowing landlords to charge the legal registered rent upon renewal," said Kenny Schaeffer of the Met Council on Housing. "It's a terrible idea" for tenants to complain to DHCR about preferential rents, he added. Instead, they should seek to address the matter at housing court, he said.

The decisions on preferential rents are not unfair, replied Mitch Posilkin, general counsel of the Rent Stabilization Association, a trade group that represents property owners across the city.

"We think it's common sense," Posilkin said. "When a landlord is willing to accept less, and then at some point down the road the landlord says he wants to collect what he's allowed to collect, tenants view that as the end of the world."

Major Capital Improvements

Tenant advocates said another example of pro-landlord bias is Major Capital Improvements. Landlords who make big repairs or improvements to their buildings - say, installing a new boiler or replacing the elevator - can pass along the costs of such improvements to tenants. These costs are added to tenants' rents -- permanently. Landlords who make such improvements will get reimbursed for much more than the actual cost of the work.

Over the years, the state agency has decided that costs associated with MCIs can also be passed along. These "enhanced MCIs" stretch the rules, said Bob Katz, general counsel to the Queens League of United Tenants.

"They included the costs of pruning trees and seeding lawns -- in order to put in a boiler," Katz said of one MCI request made by a Queens landlord.

Pushing Towards Deregulation Or Toward More Evenhandedness?

"All of this happens because landlords want to deregulate apartments," said Katz, who added that he overheard a state official telling landlords’ attorneys ten years ago that by the time Governor Pataki is out of office, “most of the apartments will be deregulated.”

"It's coming to pass. They're going down very, very quickly."

Others agreed that deregulation of rent regulated apartments - which can occur when a rent reaches $2,000 and becomes vacant - is the force pushing interpretations favoring landlords on MCIs, among other examples.

"Since George Pataki has been governor, there has been a shift toward landlords in the state legislature, the appellate courts and the housing court," said Sam Himmelstein, a tenant attorney.

But landlords see the agency as finally emerging from years of bias toward tenants.

"There's no question that historically DHCR was notoriously biased in favor of tenants," said Posilkin of the Rent Stabilization Association. "We would view it as a more evenhanded organization today. In the past, there were two possible results: no determination, where the case would languish, or a ruling against the owner."

Whether it is "evenhandedness" or "pro-landlord bias," the state housing agency's interpretations can be traced to its leadership, which changed significantly when George Pataki became governor, said Michael McKee of the Tenants Political Action Committee.

"As soon as Pataki was elected, he brought in top people from the real estate industry and turned the office of rent administration over to them," McKee said. An attorney who represented slumlords in Harlem, Marcia Hirsch, became the agency's general counsel, McKee said.

A former employee who worked at the agency for over 15 years agreed.

"Four or five people were hired to run the show," explained the former employee, who requested anonymity because he says he is still in the field and fears retaliation. "They basically swung the agency 180 degrees. (Agency staff) just assumed the top people wanted it interpreted in a pro-landlord way and they would, on their own, issue orders in favor of the landlords.

"Most of the people who were hired had worked as landlord representatives before. That certainly was a total change under Pataki."

And the agency came under pressure from attorneys representing landlords with cases before the agency, the former employee charged.

"There were certain landlords' attorneys who knew these few key people in the agency and could find a way to get a ruling in favor of their clients," the former employee said. "Eventually the exceptions they created would swallow the rule.... I think that went on a lot and probably still goes on to some extent."

The agency denied that allegation.

"These assertions are obviously the work of an unidentified former and disgruntled state employee," the agency said in a statement. "And we cannot say in stronger terms that the charges are false, inflammatory and wholly without merit or truth."

A Change In The Next Adminstration?

Would a Spitzer administration hire people to make the agency over? Housing advocates are not counting on it.

"My fear is that Mr. Spitzer comes from real estate money," said Himmelstein. "His father's a big landlord in New York.... He's been very good at going after Wall Street, but I bet you can't name one real estate person he's gone after."

"I am not aware of the attorney general's position on any of these issues," Posilkin said.

Spitzer could help everyone if he were to indicate more clearly how he views critical housing issues, McKee said.

"We don't know if Eliot Spitzer is going to be pro-rent regulation," he said. "He's carefully avoiding any mention of it. We've asked him. He hasn't said a word about being in favor of rent regulation, repealing home rule, or repealing high-rent decontrol.”

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